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Lloyd’s this morning announced a pre-tax profit of £1.4bn for the first half of 2021. This was driven by £963m of underwriting profits and was despite a fall in investment income.



1H20 1H21
£m £m
Gross written premiums 20,047 20,465
Net premiums 12,569 12,362
Underwriting result (1,313) 963
Investment income 940 623
Pre-tax profit (438) 1,432
Combined ratio 110.4% 92.2%
Central Solvency Ratio 209% 218%


The underwriting improvements reported by Lloyd’s were not solely due to lower COVID claims. The combined ratio improved by 4.8 percentage points to 92.2%, which compares to a 1H20 ex-COVID combined ratio of 97.0%. Positive rate momentum in 1H21 meant an average risk adjusted rate increase of 9.9% for the market vs. 8.8% in 1H20. Lloyd’s reported 4% volume growth from new business and 6% volume declines due to remediation.

The attritional loss ratio improved by 2.1 percentage points to 50.5% for 1H21 (52.6% in 1H20), with prior year releases improving to 0.9% (vs. 0.5% in 1H20). COVID reserves remain largely unchanged vs. 1H20, as does the COVID IBNR of c50%. Approximately 80% of COVID claims have now been paid.

The 1H21 expense ratio saw an improvement of 1.9 percentage points from 37.7% to 35.8% with Lloyd’s continuing to address acquisition costs and administration expenses as part of its modernisation programme.

Please click here for access to the full interim report and analyst presentation.

Alpha comment: A return to an underwriting profit for the Lloyd’s market in 1H21 is welcome news. There was an improvement across all major metrics, including a combined ratio of 92.2% which indicates higher underwriting standards. Rate rises of 9.9% reflect strong trading conditions, with improvements across all classes of business. There was also improvement in the underlying attritional loss ratio to 50.5%, reflecting the continuing market remediation by Lloyd’s. Major losses totalled 6.8% of premium in 1H21, above the 10-year average of c4%, primarily due to Winter Storm Uri. Recent losses from the European floods (Storm Bernd), US wildfires and Hurricane Ida are, of course, not included in the 1H21 figures. We are also encouraged that the COVID estimates are unchanged. We are pleased to see that the expense ratio has fallen to 35.8%, due to a 1.9 percentage point reduction in acquisition costs. Administrative expenses were flat (as a percentage) and Lloyd’s acknowledged that more focus is needed on this area. The reinsurance deal for the Central Fund will enable Lloyd’s to support more growth at a lower capital cost to members. Overall, we believe this to be an encouraging set of results, albeit there is still more to be done in terms of underwriting remediation and cost reductions.